The traditional way.
Custodial solutions are not new. Financial institutions (primarily banks) generally provide the secure storage of financial products to take out the risks from their clients. They also offer insurance and additional services to issue or manage the funds in their custody. Such services typically include security software, reports, market making, and many others.
Crypto-custodial solutions have mostly been built on the same model. A custodian would offer cryptocurrencies wallet and storage while aggregating holdings of multiple clients to provide financial services on top of the underlying security. In this sense, crypto-custodial solutions have become active asset management on behalf of clients.
How does it work?
Custodians generally offer a secure solution to store and manage cryptocurrencies. They often use multi-signature wallets, HSM, or multi-party computation solutions. The wallet holds the cryptographic keys required to access, transfer, and claim a token or cryptocurrency ownership. Ten years ago the first wallets allowing us to use crypto were inconvenient (paper wallet) and often insecure. Only people with extensive knowledge of technology or passion for crypto could properly secure their assets. We then moved to hardware wallets, emphasizing security and giving responsibility to the crypto owner itself.
Old bitcoin paper wallet
The idea of becoming your own bank is one of the fundamentals of cryptocurrencies ideology but creates an extensive barrier of entry for non-teach savvy crypto users. Ease-of-use remains a critical factor, and a distinction became popular amongst early crypto-enthusiasts with “online/hot” wallets providing a better user experience and “offline/cold” wallets bringing significantly higher security.
The regular hacks of online crypto exchanges or noncustodial wallets provide a constant reminder that funds must not be stored online. At the same time, institutional interest in cryptocurrency and other crypto-related assets is now visible. Financial institutions, funds managers, or large crypto holders can’t manage their assets using hardware solutions. They need security software to set extensive rules and policies according to their internal risk management processes.
Most of the large custodians today are replicating how the traditional custodial works. They offer either:
- Cold storage solution for long term holding
- Tech software suite to build your custody solution yourself.
- Financial services on top of the security storage.
They specialize in serving clients with important holdings, large traders, banks with extensive risk management policies, or crypto exchanges looking for financial services. Their business model is based on assets under management or transaction fees pushing them to constantly attract clients with large holdings. They have been highly successful in this, and the assets under custody (AUC) are growing up fast.
Crypto assets under custody growth
An unserved market.
At atato, we believe that crypto custody should not be reserved for large financial institutions or crypto wales but, on the contrary, be offered as an alternative between a Metamask wallet and a fortune 500 custodian.
As more and more people hold a large part of their savings in cryptocurrencies or earn passive income with it, everyone should be able to access a secure and regulated crypto custodian with the same underlying security technology as a financial institution.
As Security is the number one topic of discussion when holding cryptocurrencies (maybe after price fluctuation), we need a solution that would be easily accessible, flexible, and affordable.
That is why with atato custody, we offer the features that we wished we could have as a cryptocurrency holder and user:
- Online signup. Most custodians ask you to set up a demo call first to understand your business and the number of assets you plan to secure. With atato custody, you can directly go to app.atato.com and start securing your assets.
- Flexibility. One of the bottlenecks of a custodian is adding new tokens. As more and more tokens pop up, you must have a custodian who will not block any token you wish to hold. With atato custody, we have this unique feature that we call “bring your own token” where you can add any ERC20 token in one click.
- Fixed price. Almost every custodian is pricing its services with assets under management or transaction fees. It might become costly if the number of assets grows or transact often. With atato custody, we offer a fixed price per month no matter the amount of assets.
So why would you need a custodian?
Today, if you are a corporate, a fund, or a large crypto holder, several solutions are available to secure your cryptocurrencies with differents advantages and security issues:
- Store it on an exchange. Easy to trade, but your digital assets do not belong to you anymore.
- Use a hardware wallet. Secure but with high risks to lose your crypto holding in case of mistake or seed phrase issues.
- Online wallet (like metamask). Perfect to use web3 dapps but light security.
- Large custodian. Great solution but difficult to generate interest from them if your crypto holdings are not large enough.
As a business holding cryptocurrencies or receiving crypto payments, you can’t delegate the responsibility of security to only one of your employees. You need appropriate risk management policies tailor-made for your digital assets to distribute the responsibilities of managing your crypto assets.
More than just a secure wallet a custodian allows you to invite several approvers, set up rules depending on the amount of the transaction, restrict the time of transfer or basically make sure that no unwanted transaction occurs. With atato custody, you can do all of the above to make sure that your crypto assets are properly managed and secured.
For more information contact us at [email protected]
CMO at www.atato.com